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Doceo Group
Doceo provides retail investors with a platform to access data and analytical video updates from investment managers
abrdn Property Income - August 2023 Update
Jason Baggaley and Mark Blyth, fund managers of abrdn Property Income Trust, explore the key drivers of the recent NAV, asset valuations and why investors can trust them, and the demand for office space in a post-COVID world.
Ruffer LLP - An introduction to the strategy?
The Ruffer approach has remained unchanged since the firm's inception in 1994. Their all-weather, unconstrained investment strategy allows for the construction of a unique portfolio of assets which is designed to achieve their two investment objectives: Not to lose money in any twelve-month period, and to generate returns meaningfully ahead of the return on cash.
Ruffer Investment Company - August 2023 Update
Jasmine Yeo, one of the core fund managers at Ruffer, explains how the Ruffer portfolio is positioned for a new inflation regime, a potential recession, and further liquidity withdrawal from financial markets. By addressing these risks first and foremost, the portfolio is protected from the most damaging dislocations which endanger today's financial markets.
abrdn China Investment Company - August 2023 Update
Alec Jin, Investment Director at abrdn China Investment Company, delivers a comprehensive update on the trust, exploring China's promising long-term prospects and the significance of GDP for investors. Despite immediate challenges, China's 2023 growth target of 5%, coupled with attractive valuations, presents potential attractive long-term investment opportunities, especially within growth sectors of green energy and technology.
Latest News
Results from RICA, MNTN, BOOK, RTW, ATR, CGL, ACIC, HHI, ASCI, FSFL, OCI, API, MHN, AJOT, NAS, GSEO
Unfashionable belief of the week
“Markets still believe in a 'soft landing' - inflation dissipates without a recession. Yet we stick to our increasingly unfashionable belief that record monetary tightening's full impact has yet to be felt. Locked-in low rates and faster nominal GDP growth have likely deferred - but not de-fanged - the biting point…From our derivatives to dollars, yen to bonds, the fund remains well-positioned for the reassertion of gravity in financial markets, and the opportunities that will lie beyond.” Ruffer (RICA) update for the month of August during which NAV declined -0.9%. For more on RICA have a listen to the latest Doceo fund manager video update here
Very substantial premiums
Literacy Capital (BOOK) saw net assets rise 16.1% to ￡293.1m in the first half. The share price fared even better, rising 27.2% and easily outperforming the FTSE All-Share’s 2.6% increase. Comment from Director Richard Pindar: "Many of BOOK's earliest investments have matured and grown substantially since Literacy originally invested. We are now seeing large and well-respected investors taking an active interest in many of our businesses. We expected cash inflows to be significant in 2023 and we expect this to continue in the second half of the year and into 2024…We look forward to delivering further positive outcomes for BOOK's shareholders, its portfolio companies and their employees, and communities across the UK; including, improving outcomes for as many children from disadvantaged backgrounds as possible."
Comment from Liberum: “After the sale of Butternut Box in August, the company’s portfolio is now almost exclusively invested in buyouts rather than growth capital, with growth capital accounting for 0.5% of net assets. These buyout investments continue to perform well with the top 10 holdings experiencing average revenue growth of 69% year-on-year.”
Financially self-sustaining
Half-year Report from Schiehallion (MNTN) gets straight to the point: “NAV Total Return was -8.3% for the Ordinary Shares and 0.3% for the C Shares, which retained material exposure to US Treasury Bills during the period. The share price discounts to NAV of both the Ordinary Shares and the C Shares widened during the period to 39.9% and 50.4% respectively. Public markets performed relatively strongly over the period…” while “…Private company valuations lagged public markets…”
The Report points out that “The operational performance within your portfolio remained solid. Mean average revenue growth was 30%...we are seeing companies across the board make strong progress towards becoming financially self-sustaining, through a mix of cost-cutting and top-line growth delivering operating leverage benefits.” Looking ahead: “Following the conversion of the C Shares, Schiehallion will have total net assets of approximately $1,095m, diversified across 46 companies, with cash and Treasury Bills of approximately $162m. We believe that this leaves the Company well placed to support and build positions in companies that are executing well and where we see attractive valuations.”
Numis finds MNTN interesting: “We believe Schiehallion has an interesting approach…The fund is attractive to many investors given its fee structure with a modest base fee and no performance fee, leading to an ongoing charges figure of 0.87%. This compares favourably with traditional private equity, although we note the approach is different–taking minority stakes in late-stage private businesses, compared to taking majority stakes and seeking to generate value through operational change.”
JPMorgan notes: “We note that MNTN does not make any mention of share buybacks. With a headline discount at nearly 40%, and an implied discount on the unlisted investments of 58%, a share buyback would result in significant accretion to NAV per share. Using cash equivalent to 5% of NAV ($55m) would buy 85.3m shares at the current share price, 8.3% of the total in issue, and add 3.6% to NAV per share, holding all else equal.”
领英推荐
Round Hill Music Royalty Fund and the cycle of life
When does an emerging asset class / investment trust sector drop the emerging tag and become an established asset class / investment trust sector? When investors are comfortable with reported net asset values? When double-digit share price discounts to net assets disappear? When a trade buyer acquires a portfolio / investment trust at or close to net asset value? If the last, then it’s quite possible the five-year old Association of Investment Companies’ (AIC) royalties subsector has just made the leap from emerging to established…
Problem is…
It’s likely Round Hill Music Royalty Fund (RHM) won’t be around to enjoy the two-fund sector’s moment in the sun. That’s because on 08 September 2023, RHM issued a press release titled: “Recommended Cash Offer” . The announcement gets straight to the point: “The board of directors of each of Alchemy Copyrights, LLC, trading as Concord (Concord) and RHM are pleased to announce that they have reached agreement on the terms of a recommended cash offer pursuant to which Concord Bidco, a wholly-owned subsidiary of Concord, will acquire the entire issued and to be issued share capital of RHM (the Acquisition).”
As for the price: “Under the terms of the Acquisition, Scheme Shareholders will receive: For each Scheme Share US$1.15 in cash. On the basis of the closing price per RHM Share of US$0.69…on 7 September 2023…the Acquisition values the entire issued and to be issued ordinary share capital of RHM at approximately US$468.8 million.” How does that compare to RHM’s undisturbed market valuation just prior to the announcement? “The Acquisition represents: a premium of approximately 67.3 per cent to the Closing Price of US$0.69 as at the Latest Practicable Date; a premium of approximately 64.0 per cent to the six-month volume weighted average price per RHM Share of US$0.70 as at the Latest Practicable Date…”
60%+ premium to the undisturbed share price suggests a handsome uplift on net assets for shareholders. Sadly not, as the acquisition cost also represents “…a discount of approximately 11.5 per cent to RHM's Economic NAV per RHM Share of US$1.30 (as at 8 September 2023).” That’s because RHM shares have been trading at a steep discount to NAV for over a year now. How steep? As recently as 11 April 2023, the discount stood at 51.61%. Wasn’t always the case, though. After coming to market in November 2020, RHM shares traded at a small premium or close to par for at least the first year of its public life. Summer 2022, that was when the discount first entered double-digit territory.
“You’re Gonna Go Far, Kid” by The Offspring (RHM’s 7th top earner in 2022)
The November 2020 IPO of course coincides with the height of the pandemic. No mean feat then for an investment trust in a small and emerging asset class not only to IPO but also to raise US$282 million. As RHM Chairman Trevor Bowen commented at the time: “When considered against the global turbulence prevalent during the IPO process due to COVID-19, this achievement clearly demonstrates a strong investor appetite for both the music royalty asset class, the performance of which is highly uncorrelated to movements in the global economy, and the recognised expertise of the Round Hill team as an investment manager in this sector. The company has an identified portfolio of exceptional songs and catalogues including classic tracks from some of the world’s best-known artists that are already extremely familiar to the investment manager. We will actively progress and update on our intention to purchase the identified portfolio for the company as soon as practical.”
The identified portfolio included 18,000 musical compositions from iconic names such as: The Beatles, The Rolling Stones, Louis Armstrong, Marvin Gaye, Elvis Presley, Percy Sledge, James Brown, The Supremes, Meat Loaf, George Harrison plus many more. According to RHM’s Prospectus: “The Pipeline Investments* are well known to the Investment Manager as they comprise the existing investments of Round Hill Fund One, a private fund whose investments are managed by Round Hill. On completion of a successful due diligence exercise, a transparent and independent valuation process, agreement of contractual documentation and, subject to the Board’s approval, it is anticipated that the Company will acquire some or all the Pipeline Investments within six months of Initial Admission.” As for cost: “…the Pipeline Investments have been secured at an independent valuation of US$363 million as at 30 June 2020.” The portfolio was acquired in early 2021.
Money raised. Initial portfolio acquired. Shares trading above net assets. The title of RHM’s second top earner in 2022 springs to mind…
JEMA jumps
BARGAIN BASEMENT
Discount Watch: 17
Our estimate of the number of investment companies whose discounts hit 12-month highs over the course of the week ended Friday 08 September 2023 – two less than the previous week’s 19.
Ten of the 17 were on the list last week: Atrato Onsite Energy (ROOF) from renewable energy infrastructure; Ecofin Global Utilities and Infrastructure (EGL) from infrastructure; Blackstone Loan Financing (BGLF) from debt; PRS REIT (PRSR) and Phoenix Spree Deutschland (PSDL) from property; LMS Capital (LMS) from private equity; Menhaden Resource Efficiency (MHN) from environmental; Syncona (SYNC) from healthcare; and Bankers (BNKR) and Monks (MNKS) from global.
That leaves seven newcomers: Crystal Amber (CRS) from UK smaller cos.; Dunedin Income Growth (DIG) from UK equity income; BlackRock Sustainable American Income (BRSA) from North America; Foresight Sustainable Forestry (FSF) from forestry; Aurora (ARR) from UK all companies; Brown Advisory Smallers Cos (BASC) from North American smaller cos; and Harmony Energy Income (HEIT) from renewable energy infrastructure.
ON THE MOVE
Monthly Mover Watch: Three
Trusts making a second consecutive appearance on broker Winterflood’s list of top-five monthly movers. First up, Geiger Counter (GCL) extended its gain on the month – shares are now up 22.4% compared to 12.3% previously. Enough to see GCL move from second to top spot on the list. Still no company news out since the June interims. Still put the gain down to strong uranium markets then.
Next, JPMorgan Emerging Europe, Middle East & Africa (JEMA) jumped three places to claim second spot. As with GCL , JEMA saw its monthly gain increase (to +14.9% from +9.2%). As with GCL , JEMA did not put out any news over the course of the week. As with GCL , put JEMA ’s strong move down to buoyant end markets, specifically the emerging variety. JPMorgan Global Core Real Assets (JARA) , the third trust to make a second consecutive appearance – an 8.8% rise enough to take fourth spot. Shares continue to be supported by the trust’s share buyback programme. On 5 September, the company announced a further 100,000 shares were bought back.
That leaves two new entries. India Capital Growth (IGC) - shares up 9.4% on the month. No news out but the Indian market is up 9.5% year to date. That means IGC is outperforming, as the trust’s shares are up by a quarter in 2023. Finally, Atlantis Japan Growth (AJG) takes the final spot in the top five thanks to an 8.4% gain on the month. No mystery surrounding this one – AJG ’s proposed tie-up with Nippon Active Value Fund (NAVF) .
Looking ahead, seems likely there’ll be a new entrant to the top fivers next week - possibly a new top mover too. News of the potential acquisition of Roundhill Music Royalty (RHM) too late for this week’s On the Move summary. But next week…
Scottish Mortgage Watch: Slightly off week
For Scottish Mortgage (SMT) and the wider global sector. SMT ’s share price ended down 1.5% on the month having previously been off 0.8%. Similar story for NAV – a 0.4% gain turned into a 0.4% loss. The global IT sector however remained unchanged – off 0.5% on the month.